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Scenario: Countries A and B
Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all of its resources to produce steel, it can produce 250 tons of steel and no wheat. If country B spends all of its available resources producing wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the production of steel, it can produce 400 tons of steel.
-(Scenario: Countries A and B) Look at the scenario Countries A and B. If country B produces 300 tons of steel, how many tons of wheat can it produce?
A)100
B)200
C)300
D)400

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Quizplus · Accepted Answer

Country B has a linear production possibility frontier, meaning the trade-off between wheat and steel is constant. If it produces 300 tons of steel, it uses 3/4 of its resources for steel (300/400). Therefore, it can use 1/4 of its resources for wheat, producing 100 tons (1/4 of 400).

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